23 Dec Embedded Giving: Another Hook for the Compulsive Shopper

A New York Times Article Charity’s share from shopping raises concerns calls it “a marketing gimmick run amok” and warns that the potential for scamming is huge. The practice of embedded giving , of building a donation to charity into the purchase price of a particular item or items from a certain retailer, has mushroomed in recent years. The practice is essentially unregulated. The promised donation may never reach the charity. Economists who track giving trends are concerned that people will mentally substitute the meager portion of their consumer purchase that goes to charity for more substantial direct contributions.

As a bankruptcy attorney, I see another reason to be wary of this trend. For the most part, it’s a gimmick to get people to buy more stuff, and often that translates into escalating credit card debt. It’s not much consolation to the client sitting in my office that 2 or 3% of the debt which landed him there went to the worthiest cause on earth.

The most impeccable charitable causes have long used the portion of proceeds arguments to overcome people’s resistance to buying goods and services they cannot afford or should not be using at all. The church bingo game and the child peddling candy and cookies on behalf of some youth program to an elderly overweight neighbor are familiar to us all. Some nonprofits, such as museums, have even developed their own line of luxury merchandise which they sell directly to the public. In both of these cases, consuming in the name of charity is clearly demarcated from general consumption, and the proportion of the purchase price going to the charity fairly high.

More recent, and more troubling, is the trend toward making a huge range of consumer purchases a charitable act. One well-organized campaign I encountered on the internet touted its efforts as retail therapy, promoting a prepaid one-day shopping spree offering 20% of purchases at participating retailers to a high-profile medical charity.

I would imagine the participants felt really good about themselves until the credit card bills started coming in and they realized that they had a closet full of unneeded clothing and personal care items and nothing with which to pay the electric bill. A number of websites offer a smorgasbord of legitimate charities and online retailers, allowing a person to pick and choose. Percentages to charities are much lower, ranging from .75% to 7 or 8%. A careful consumer, having formed a list of things for which he or she had some use, and could afford, might well find some of them through this site, but that’s not the shopper these sites target, any more than credit card companies send multiple solicitations to people who always pay their balances in full.

Avoiding bankruptcy when finances get tight, or rebuilding credit after bankruptcy, requires using every dollar to maximum effectiveness. Charitable contributions are most effective when they are given directly to an organization with a proven record of helping people. If you ignore the imbedded giving sales pitch, you just might find that you save enough from not buying useless stuff to donate a more substantial amount directly to that worthy cause.

I was admitted to practice in 1978. I am certified as a Consumer Bankruptcy Specialist by the American Board of Certification. I regularly speak on tax and bankruptcy issues at state, regional and national conferences. Years of experience in practice before the Internal Revenue Service and Oregon Department of Revenue have given me the background to resolve a large variety of consumer tax issues.